: The $225 Million Typo
12-12-05, 06:41 PM
The $225 Million Typo
By Dayana Yochim (TMF School)
"Are you sure you said 'one?' I swear I heard you say '610,000.'"
Thus, we surmise, began the very uncomfortable conversation earlier
this week at Mizuho Securities Company in Japan, upon discovering that it
accidentally offered to sell 610,000 shares of J-Com Co. for less than one
penny per share -- when the client really meant to sell one share at 610,000
yen (about $5,000).
According to an article in the Los Angeles Times, a data input error
at the financial services firm is behind the botched sell order. The typo
cost the company 27 billion yen, or $225 million, and countless utterances
of "moshiwake gozaimasen" (the most formal version of "I'm really, really,
really, really sorry" in Japanese).
The mea culpas weren't enough to keep the Nikkei 225 index from
dipping nearly 2%, or the Mizuho Financial Group from shrinking 3.4% to
890,000 yen (around $7,500 a share). The erroneous trade will likely eat up
the company's $233 million worth of first-quarter profits as well.
Unfortunately, there are no do-overs for Mizuho: The Tokyo Stock
Exchange will not reverse the transaction. (MFG traders probably shouldn't
count on a big Christmas bonus.)
The guy who bought 610,000 shares for a penny a piece is my friend at Morgan ....I think he can count on a huge bonus!
12-12-05, 06:45 PM
Good on your friend!
12-12-05, 06:47 PM
It looks like someone f***ed up bigtime!
12-12-05, 07:09 PM
It happens pretty often (usually not in such a hug amount) but trading Japanese stocks is beeyatch because you have to put in 3 sequeces of numbers and a correct order flag in a split second. And since its an electronic exchange, when you hit 'return' it goes to the exhcnage and gets executed within split second.
So for instance, if you want to sell short 50,000 shares of sony at 5000 yen you would type
If you screw up a digit in the first line you're now trading a different stock like Panasonic (1 digit apart)
If you screw up line two and three like this bastard, you have quantity and price backwards
and if you type s instead of ss, your firm could get fined and banned
Everyday was a freakin stress-fest!
12-12-05, 07:22 PM
Being a stock broker is probably one of the most stressful jobs out there.
12-12-05, 08:04 PM
I think they cope by picking nice things from the Sunseeker catalogue with their christmas bonuses.
And having a good laugh by panicing over oil stocks if a butterfly flaps its wings in South America and watching us pay £1 a litre at the pumps for no good reason.
I especially don't like the ones who know nothing about an industry and just watch the biggest company in that industry and if they issue a profit warning then the analyst says the whole segment will have problems. So the small guy does well becuase he's good and the big boy blows, but his stocks go down too becuase ths big guy suffered. It's almost comical.
12-12-05, 08:21 PM
yeah....the tail gets wagged by the dog!
Sometimes (only sometimes) this can work to your advantage though....for instance last week in XM radio. Citi analyst comes out with massive bullish research and insitutional big boys bought it up. Me (the tail) who happened to own the stock got a free ride up on the back of the bigboys rebalancing their portfolio to make sure they arent underweight XMSR.
.....now only if I can get a heads up before they start sellin it....
12-12-05, 08:28 PM
This is spooky. I used to work at a ECN which is nothing more than a mini stock market. They (NASDAQ) does not have a test system, only test symbols. Well, some one told me to copy live data down to test from production for a trial run. They said do it now. Trouble is that is was feeding live trades. The good news is that they were so far out of market they were all rejected (how that is, I do not know since it was from live). It wasn't my fault but I actually threw up when it became clear to me what had happened. If we had "backed away" from those trades if they were accepted it would have meant hundereds of thousands if not a million or more.
12-12-05, 08:47 PM
Yeah, I have puked too......one of my error tickets was in the high six figures range.....I typed B instead of S and ended up buying instead of selling.... ROLF
12-12-05, 08:56 PM
The crazy thing is that I'm not even a trader, just a DBA and IT guy following instructions. however, I take money and OPM very seriously. That really, really scared the crap out of me as I don't like mistakes and my name mentioned together. From then on out I wouldn't do squat with regard to moving data with out the most high up OK and making sure the idiots in QA actually were removed from the network.
12-12-05, 09:06 PM
Barfing reminds me of the scene in Rouge Trader. When Leeson tells them that the customer is the bank and what the position is and they all vomit.
12-12-05, 10:26 PM
Oh yeah.....Great Movie!
12-13-05, 02:59 AM
That's a fab movie!
12-13-05, 12:34 PM
One of my all time favorites
12-13-05, 12:59 PM
This sequence sums it pretty much...
12-13-05, 01:13 PM
Not over yet......the exchange acknowledges computer glitch may have contributed to the error.....Fujitsu discovers bug in the trading platform. Watch 6702 (Fujitsu stock) plummet!
TSE admits fault in error / President may resign for Mizuho share ordermess
The Yomiuri Shimbun
The Tokyo Stock Exchange has accepted responsibility for Mizuho Securities Co.'s inability Thursday to cancel a massive erroneous sell order of newly listed J-Com Co. shares.
TSE President Takuo Tsurushima announced at a press conference Sunday night that the bourse's trading system was to blame for the brokerage's failure to withdraw the erroneous order.
Tsurushima said he was considering resigning as president of the world's second-largest stock exchange.
On Thursday, Mizuho Securities, the securities arm of Mizuho Financial Group Inc., placed an order to sell 610,000 J-Com shares for 1 yen each. The client's order had been to sell one share for 610,000 yen.
The mistaken order was entered minutes after the outsourcing and job placement firm's stock debuted on the TSE's Mothers market for start-ups at 672,000 yen.
The exchange suspended trading of J-Com shares Friday and Monday to avert turbulence. Mizuho Securities on late Thursday night estimated its trading loss from the error at about 27 billion yen.
The fiasco followed a computer malfunction on Nov. 1 that halted transactions on all 2,520 TSE-listed issues from 9 a.m. to 1:30 p.m.
As J-Com has issued only 14,500 shares, it is impossible for Mizuho Securities to buy shares on the market to deliver the physical stock to buyers. As a result, the Japan Securities Clearing Corporation (JSCC) instructed the brokerage to make cash payments amounting to 912,000 yen per share to complete the transactions on and after Tuesday.
Mizuho Securities became aware of its mistake 85 seconds after the event Thursday. But while it tried to cancel the order four times, its efforts were in vain. Initially, the TSE said the brokerage was to blame for the loss because the cancellation orders were entered with the sell price of 1 yen intact.
Making a total about-face Sunday night, Tsurushima said Mizuho Securities had followed the correct procedure to cancel the erroneous order, and the exchange was to blame. The TSE's trading system had been supposed to accept cancellation orders after executing the matching of sell and buy orders. However, the system did not recognize Mizuho Securities' cancellation orders even after completing the relevant deals.
After the error, Mizuho Securities asked the bourse to check the trading system. The TSE subsequently launched an investigation together with Fujitsu Ltd.--the developer of the system. On Friday evening, Fujitsu told the exchange of the discovery of a computer malfunction.
With Mizuho Securities' loss from the error expected to top 40 billion yen--up from the 27 billion yen it initially announced Thursday--how the brokerage and the TSE, whose trading system was to blame for the brokerage's inability to withdraw the erroneous order, will decide on the ratio of financial burden to cover the loss is being closely watched.
Some analysts believe that if the brokerage's cancellation orders were executed properly, its loss would have been kept to 600 million yen. Therefore, the TSE might have to shoulder a heavier burden, depending on how the negotiations pan out.
Through the JSCC, Mizuho Securities will pay the difference between the amount it will pay for the shares and the acquisition price to securities houses that sold the shares to customers. For example, buyers who paid 572,000 yen for a share Thursday--the day's low--will receive 340,000 yen, the difference between the amount they paid per share and the amount--912,000 yen--to be paid by the brokerage.
The TSE is working with Fujitsu to examine whether the error was in the system's design or its construction.
FSA to rap bourse
The Financial Services Agency is considering issuing a business improvement order to the TSE, obliging the exchange to fundamentally change its trading system, sources at the financial watchdog said Monday.
In a related development, Kaoru Yosano, state minister in charge of financial, economic and fiscal policy, told reporters Monday morning that confidence in the exchange's trading system had been damaged due to Thursday's debacle.
(Dec. 13, 2005)
12-13-05, 03:01 PM
I just hid some losses in my 5 eights account